INSIGHT: Moody’s – Rise in finance firms testing AI for compliance, with one-third in active trials

By Paul O’Donoghue

THERE has been an increase in the number of finance firms testing how AI can be used for compliance and risk management, according to a study from Moody’s.

The poll of more than 300 finance professionals as part of Moody’s ‘Entity Verification’ 2024 report found that there are a relatively small number of firms actively utilising AI.

Just 11% of respondents said their company was currently using AI for compliance and risk management, a slight rise compared to 9% in 2023.

However, there was a notable rise in the number of respondents who said their firm is currently in a trial or pilot phase for AI use – 29% compared to 21% in 2023.

“Despite the hype, only a small minority of companies are actively using AI for compliance and risk management,” Moody’s said.

“However, many are now in the pilot phase and others are considering its use.”

The study was an online poll carried out by Context+ in association with Moody’s. It received 310 responses from individuals working in finance firms across the world. The study then followed this up with 30 one-to-one “in-depth interviews” featuring risk and compliance professionals “to add richness and detail”.

Moody’s said there is “clearly growing use of AI for risk and compliance”, with more companies moving from consideration to trial and usage.

It also said that more companies are actively encouraging the use of large language models (LLMs) – computer programs that have been fed enough examples to be able to recognize and interpret human language.

Moody’s said for companies considering using AI for compliance, it is important that they are aware of the risks as much as the benefits.

“[These include] identifying the potential of bad actors to use these tools to subvert entity verification, or the multiple ways things could go wrong when they are used internally,” the report said.

“That involves being on the front foot and exploring and trialling new and developing technology as it becomes more sophisticated. 

Moody’s added that “size matters” when it comes to how likely a company is to move towards using AI for compliance.

“Larger companies are more likely to use or trial AI as they see opportunities to automate tasks and standardise the quality of areas like customer experience,” it said. 

“But the trend towards AI is clear, with ongoing shifts towards acceptance, encouragement, and adoption, as more companies take a positive stance on AI, driven in large part by the rise in the use of safer, private LLMs.”